Negative Points

• FY27 all-in sustaining cost guidance increased to $1,795-$1,995 per ounce, driven by cost escalation of 4-5% and additional sustaining capital investment of $50-$60 million.

• Production guidance for FY27 is weighted to the second half, with the September quarter expected to be the weakest due to planned shutdowns and development access constraints.

• Ernest Henry production is expected to decline in FY27 due to the need to catch up on development after the weather event and the presence of waste in the cave, with similar production levels expected in FY27 and FY28.

• Red Lake production is expected to be lower at 30,000-35,000 ounces per quarter in the near term, with a longer-term plan to increase back to 35,000-40,000 ounces.

• Cost inflation pressures, particularly in labor (4.5% increase) and maintenance parts (3-10% increase), are impacting the cost base, especially in Western Australia.

• The company's dividend increase to 60% payout may not satisfy all shareholders, as some may prefer special dividends or buybacks, and the company acknowledges it cannot please everyone.

• The Carnaby acquisition is expected to take up to three years to deliver first ore to the Ernest Henry mill, indicating a long lead time for value realization.

• The company is investing an additional $50-$60 million in sustaining capital for fleet and infrastructure, which may not yield immediate returns.

• Mount Rawdon is transitioning to care and maintenance, with a closure provision of $75 million, and there is uncertainty about the pumped hydro project's future.

• The company faces potential downside risks from operational disruptions, as highlighted by the weather event at Ernest Henry, which impacted production and required insurance claims.

Q & A Highlights

Q: Can you walk us through the process to arrive at the 60% dividend payout ratio, and what drives the upper band? What other forms of returns may or may not have come into consideration? A: Fran Summerhayes (CFO) explained that the capital management plan is focused on maximizing long-term value based on life-of-mine plans and asset quality. Given the company's strong financial position and confidence in the outlook, increasing the target dividend payout to 60% of annual group cash flow represents the highest return outcome for shareholders. The company does not intend to accumulate excess cash on the balance sheet; if metal prices remain supportive and cash generation exceeds business requirements, they will continue to evaluate the full range of capital management options, including special dividends or buybacks, to reward shareholders.

Q: Regarding the Carnaby deal, when do you think you could have first ore to the Ernest Henry mill? And what is the thinking behind the third-party tolling agreement with Glencore? A: Lawrie Conway (CEO) stated that the Carnaby deal is expected to close in November, subject to shareholder vote. It will take about 12-18 months to complete the feasibility study, followed by another 12-18 months for development, meaning first ore could be up to three years away. The third-party tolling agreement is linked to Glencore's offtake agreement on the Mount Margaret project; if that project starts, ore would come through the Ernest Henry plant given available capacity. The company has the capacity to handle both the Carnaby deal and the offtake agreement alongside the Corella exploration program.

Q: Can you comment on the structure of the Carnaby consideration? Wouldn't it be better for existing shareholders to use cash rather than issuing more equity? And do you see other bolt-on opportunities across your portfolio? A: Lawrie Conway (CEO) explained that Carnaby's Board and team preferred scrip consideration to participate in the upside through Evolution shares. The dilution is minimal at approximately 1%, representing the best use of scrip for this transaction. For future acquisitions, the company will continue using a mix of cash, debt, and equity depending on size and scale. Regarding bolt-on opportunities, Cowal, Red Lake, and Ernest Henry have latent mill capacity, while Northparkes has enough ore bodies to fill its plant. Mungari has capacity but limited options to improve quality currently.

Q: With the cash on the balance sheet, what made the Board reluctant to consider a broader range of returns, such as a special dividend, to accelerate shareholder returns? A: Lawrie Conway (CEO) acknowledged that no capital management plan will please every shareholder. With $1.4 billion of group cash flow, the company is paying out over $830 million back to shareholders, an incredible rate of return. The increase from 50% to 60% payout is a good step. The company does not intend to build excess cash; if metal prices stay elevated, significant cash flows will be generated, and the dividend cents per share will be higher. If prices remain strong over the next 12 months, the company will evaluate special dividends, buybacks, or a higher payout rate.

Q: At Ernest Henry, is the cycling down in production and stepping up in spend just for FY27, or is this a multi-year impact of developing down to get life extension infrastructure in? A: Lawrie Conway (CEO) explained it's a combination of factors. The weather event left water at the development level, requiring catch-up work on ventilation and refrigeration. Additionally, the operation is going through areas in the cave with waste mixed with mineralized ore, displacing ore production. Production for FY27 and FY28 will be similar, with ventilation restored next year and going deeper. After that, production should recover as more ore becomes available from the cave, potentially supplemented by the Greater Duchess (Carnaby) project.

Q: Can you provide an update on expected insurance recoveries from the weather event at Ernest Henry and the process for receiving them? A: Lawrie Conway (CEO) confirmed the operation has insurance coverage, similar to the 2023 event where proceeds were received. Mobile fleet damaged or destroyed during the event is covered, and replacement equipment is already being sourced. The cost of recovery and remediation is being worked through and will be submitted to insurers, with outcomes expected during FY27.

Q: At Red Lake, production appears to be resetting to 30,000-35,000 ounces per quarter from closer to 40,000. Can you talk through the moving pieces and whether production can creep back up? A: Lawrie Conway (CEO) stated that this year and next year production will be closer to 30,000-35,000 ounces per quarter due to current mine positioning. In the second half of this year, new mining areas will be accessed. Beyond the next couple of years, work on tailings reprocessing and exploration is aimed at getting production back to 35,000-40,000 ounces per quarter and above. Red Lake has three mining areas but lacks excess capacity compared to other operations, requiring more effort to increase production rates.

Q: Is a 10% to 15% long-term gearing ratio still the target, or do you look to maintain a more conservative balance sheet near term given upcoming CapEx? A: Fran Summerhayes (CFO) confirmed that over the long term and through cycles, the company still targets 10% to 15% net debt. However, they are prepared to go outside that range for high-value opportunities, as demonstrated in 2023 when gearing reached 33% net debt before returning to a net cash position within three years due to higher metal prices.

Q: What further balance sheet optimizations could be done over the next 12 months given the strong cash position and undrawn revolver? A: Fran Summerhayes (CFO) stated that the focus is on delivering commitments within FY27 guidance ranges. The $70 million to $90 million allocated to studies and growth will be evaluated to see if capital can be directed to higher-returning investments. If higher gold and copper prices are banked, the company does not see value in holding large cash balances and will look to reallocate excess cash to shareholders.

Q: What diesel price have you assumed for FY27, and are you seeing similar cost pressures on growth CapEx as on maintenance parts? A: Lawrie Conway (CEO) stated that growth CapEx projects are on budget, with cost escalation already allowed for

For the complete transcript of the earnings call, please refer to the full earnings call transcript .